Wells Fargo: No customer backlash…yet
NEW YORK — Wells Fargo’s iconic stagecoach isn’t losing tons of customers — at least, not yet.
Even though the fake account scandal that erupted in early September has tarnished Wells Fargo’s reputation, the bank said on Friday that its roster of customers actually increased last month.
Customer checking accounts jumped by 4.5% in September. The bank admitted on September 8 to creating as many as 2 million fake accounts and firing 5,300 workers since 2011.
The numbers suggest Wells Fargo weathered the storm relatively well in the early weeks of the scandal.
Scrutiny on the bank has intensified with two Congressional hearings on September 20 and 29, where lawmakers compared Wells Fargo to a “criminal enterprise.” Earlier this week, longtime CEO John Stumpf abruptly decided to retire.
With just one day under his belt as Wells Fargo CEO, Tim Sloan acknowledged the challenges ahead, saying he’s “deeply committed to restoring the trust” of customers and investors.
“We know that it will take time to and a lot of hard work to earn back our reputation,” Sloan said in a statement on Friday.
Some analysts believe Wells Fargo still risks a possible backlash from customers who feel they were cheated.
Steve Beck, founder of management consultancy cg42, predicts Wells Fargo will experience “heightened levels of defections” over the next year. Beck pointed to his research that shows Wells Fargo customers had long had a sense they were getting sold products they didn’t want or need.
The scandal has forced Wells Fargo to make a dramatic reversal of its business strategy by abandoning the sales goals behind its now-infamous cross-selling emphasis. Employees have said unrealistic goals forced them to cheat by opening unauthorized accounts.
Wells Fargo’s cross-sell ratio, a stat the bank has bragged about for years, dipped slightly last quarter to 6.25 products per household.
Wells Fargo faces a laundry list of class action lawsuits and investigations, including one from the Department of Justice.
The bank did not specify how much money it has set aside to pay upcoming legal settlements, however it did say expenses jumped 7% last quarter in part due to higher “litigation accruals.” Wells Fargo, which was slapped with a $185 million fine over the fake accounts, said it expects costs to “remain at an elevated level.”
Wells Fargo’s third-quarter profits slipped almost 3%, though they narrowly exceeded Wall Street’s targets.